A CEO's View Of Analytics: Duluth Trading Company

Steve Schlecht's company made its name with practical work clothes and clever ads. But it needs new analytical skills to thrive amid the retail disruption caused by mobile technology.

Duluth Trading Company CEO Steve Schlecht points to two things at the heart of his retail company's success: creating one-of-a kind work clothes, and being "great storytellers" about those products. That storytelling approach explains the tens of thousands of YouTube views of videos for Duluth's Ballroom jeans to let men "crouch without the ouch," or for its long-tail t-shirts designed to cover up "plumber's butt".

But Schlecht says Duluth, which sells mostly through the Web and catalogs, also needs to get better at data analytics to succeed in a retail world that he describes as "omni-channel"--reaching customers via mobile, Web, print catalogs, email, social media, and stores. (Duluth has one store and is planning several more.) This trend of customers shopping multiple channels at once is as big a disruption as any Schlecht has seen in his 42 years in retail.

"Today my biggest challenge is this area of analytics," Schlecht said, speaking to the Fusion CEO-CIO conference in Madison, Wis., last week. "How can we get in the heads of our customers, understanding how they shop, how they buy, what they're looking for?"

Listening to Schlecht's no-nonsense view on retailing's future is good tonic for any IT leader not moving to steadily improve in-house analytics capability. Schlecht doesn't consider Duluth on the cutting edge: "We were always following Lands' End," Schlecht said of the fellow Wisconsin-based direct merchant. "Whatever they would do, we'd do about a year later."

But Schlecht built and sold his last catalog business, Gempler's, to W.W. Grainger, and he says Duluth Trading is growing at around 20% a year. Given his track record, and four decades of perspective on the industry, when Schlecht says we're in the midst of a "total disruption in the way purchases are made," it's worth noting why, and how he sees analytics playing into this change.

Schlecht painted this thumbnail history of the retail industry's disruptions:

1970s: Big box category killers like Circuit City emerge, as an offshoot of the discounters.

1990s: E-commerce, from Amazon to Webvan, enabled by the Internet.

Today: Omni-channel and omni-directional buying, where a shopper might research online, ask friends via social networks, get an email and a catalog promotion, see a TV ad, and stop in a store. And it's mobile devices that are enabling it.

Duluth's existing analytics are very purpose-driven, said IT director Tim Balliet, such as systems for deciding which customer segments should get a particular catalog mailing or promotion and responding to their performance. What it now needs is more horizontal analysis of customer likes and dislikes, in order to be more proactive. One step Duluth has taken in this direction is using social network sentiment analytics from Radian6 (owned by Salesforce.com). But the company will need new skills as well as software to get where Duluth needs to be.

There's a risk to having the company culture embrace analytics, though. Not everyone's going to like Duluth's sense of humor when it comes to advertising "Buck Naked" underwear or those "Ballroom" brand jeans. "One of the challenges is figuring out what is worth responding to, and what isn't," said Mark DeOrio, CFO and senior VP of operations. "It's very easy to get totally distracted and to frankly lose your way, and turn into a totally reactive organization."

Schlecht is probably like a lot of CEOs these days--his company has too much data, and he wants help making sense of it. Marketing and IT are critical in figuring out how to do that, Schlecht said, and the line between them is "getting really fuzzy."

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Email and a culture of Bi-directional communication can go a long way toward being a "collaboration system" if worked correctly ;-).I don't discount the value of number crunching, but also making sure you are listening to your better staff and asking them of ways to think outside the box are probably underutilized in many companies.

True about trial and error, but I don't think there's a disconnect between analytics and trial-and-error, and in fact they can feed off each other. Schlecht actually started off talking about a failure -- he bought a couple tire stores in bad locations, but listening to farmer-customers who wanted to buy tire repair tools instead of paying him to fix tires led to him founding Gempler's. Most entrepreneurs have failed, he said, and companies need a culture where trying stuff that doesn't work out is OK: "When you fail, admit it and move on. ... In the corporate world, failure is an F word, and you just don't talk about it."

"Smart people" are (obviously) needed. Whilst BI and analytics can be helpful, and one needs smart people to soft through the data I suggest this only works to determine history and possibly for predictive trends. As to what's next and new trends (is that not a key metric for retailers) I am reminded of my Casio training of, "go and see." There is nothing like keeping on the street and talking to your customers. There is a trial and error factor not accounted for here.

That's an interesting perspective. Duluth has its flagship store in Mount Horeb, Wis., and it's planning for several more physical stores. That kind of in-person interaction could be one of the benefits. Then the challenge becomes how do you share that knowledge, so it's more than the one manager who gets the customer insight. That takes lively collaboration systems, as well as a culture that encourages people to speak up -- even when it's saying our baby's ugly.

"How can we get in the heads of our customers, understanding how they shop, how they buy, what they're looking for?" Maybe when customers are in the store, ask them what they like and dislike about your merchandise. So few stores actually talk to customers (if a customer is walking out of the store without purchasing anything maybe they would be a good person to talk to) or leave it up to a survey that asks about the users "Shopping Experience" (how clean was the floor, how inviting was the decor, etc...) instead of asking 1) what did you buy, 2) what didn't you buy 3) did we have what you were looking for etc... Complicated analytics isn't bad, but empowering managers to gather information and feed it up the corporate ladder may not be a bad idea either.